They Opened Up When Values Were At Their Highest And A Lot Of Their Books Are Underwater
A report from National Mortgage Professional. “Fitch Ratings recently released a report detailing the looser credit underwriting standards that emerged in the second half of 2022, as mortgage demand fell throughout the year. Court Lake, a director in the US RMBS group at Fitch Ratings and one of the analysts who authored the report, says that as the market shifted from agency refinance to more of a focus on Non-QM, driven largely by worsening economics for borrowers, ‘we saw the credit box of what we were seeing in our actual securitizations expand. That included lower FICOs, higher DTIs, and higher LTVs.’ As a result, and the second key takeaway from the report, Lake says, ‘you’re now seeing higher delinquency rates for that same vintage of collateral.’ The beginning of 2022 was when Lake began to see deterioration in Non-QM originations. ‘The worst cohort of collateral was sort of the second, third quarter of 2022,’ Lake says.”
“Worsening economics for homebuyers drove Non-QM lenders to chase volume, thereby manufacturing demand, through looser underwriting. As borrowing costs spiked, mortgage demand fell, but lenders’ profitability fell even faster. Loosening credit standards helped create volume, but at the cost of loan performance. A similar pattern is emerging in the Prime Jumbo market, says Lake. ‘I think Non-QM was a little bit more alarming in terms of how much the delinquency shot up, but if you actually look at the Prime 2023 vintage, that’s also at an elevated delinquency rate relative to their 2022, 2021, and 2020 vintages.’ This is also on account of looser underwriting in 2022.”
“‘We’re seeing a lot of similar trends there. If you look at just the loans making their way into securitizations,’ Lake says, ‘the weighted average FICO is lower. You’ve got a higher weighted average DTI. You’re seeing, in our view, what we think is more cash-out loans. We just view that as a selection bias and leaning toward kind of a worse borrower base. So, you’re seeing some similar trends that we brought out in the Non-QM report in the prime space as well.'”
“Lake says that how they look at pools of loans over time changes, generally based on the collateral attributes, views on home prices, and macroeconomic headwinds and tailwinds. For the Non-QM market, Fitch has been adjusting their performance expectations to include an increased expectation of default because of the pools’ weaker collateral. What Fitch expected to happen, has happened. ‘The average delinquency rate for a 2023 vintage transaction four months after issuance is 3.2%, which is almost twice as high as the 2022 vintage,’ Fitch’s report reads.”
The Scottsdale Progress in Arizona. “The average square-foot price of single-family homes in the Valley rose the most over the last two years in cities with the most luxury homes, according to the Cromford Report. Homes that sold for $2 million or less saw average per-square-foot prices drop between December 2022 and last month, according to the Cromford Report. That decline was the greatest among homes that sold for $350,000-$400,000, where the per-square-foot price dropped an average 7.7%. Declines in other price ranges were between 2.1% for homes selling between $700,000 and $800,000 to 5.9% for those selling between $300,000 and $350,000. ‘The cheaper you go, the more 12-month average prices tend to have fallen,’ the Cromford Report said.”
“‘We rarely see such a clear pattern, so I conclude that something is bolstering the luxury market,’ it continued. ‘It is not lack of supply, which is plentiful, although active listing counts are not excessive compared to the normal levels at these altitudes. It seems that luxury buyers have been less affected by the high interest rates which appear to have had a much more serious effect on first-time home buyers.'”
Newsweek on California. “The city of San Francisco continues to report some of the biggest price drops in the entire country, with condos downtown being sold for thousands of dollars less than they were purchased years ago, according to Zillow adverts. Home prices in the city have been plummeting since reaching a peak of $1,449,470 in May 2022, with the exception of September 2023, when they saw a modest month-on-month increase from $1,226,112 to $1,228,976, according to Zillow. Since then, they have continued falling consistently until the end of December, the latest data available.”
“Vacation rental investor Rohin Dhar has been keeping track of what he described as ‘aggressive price cuts’ in San Francisco, sharing the advert pages of homes for sales on Zillow on X. In one such advert, a 2,012 sq ft home with four bedrooms and three bathrooms is now being sold for $1,095,000 after a price cut of $704,000 from when it was listed for sale on January 19. The last time the house was sold, according to Zillow, in late March 2004, it was priced at $600,000. Another advert shared by Dhar shows a condo in the Civic Center neighborhood in downtown San Francisco which was sold for $485,000 on January 30 after being purchased for $675,000 in 2018.”
From Reuters. “Small, loosely-regulated lenders in Canada who rode a pandemic housing boom to offer mortgages at high interest rates are now showing signs of stress as a spike in living costs pushes some homeowners toward a default. For many Canadians unable to pass a rigorous test to qualify for a home loan, there has long been another option: private lenders who offer short-term mortgages at rates that are several percentage points higher than those charged by big banks. One subset of this group of lenders – Mortgage Investment Companies (MICs) – has mushroomed in the past three years, taking on riskier deals, when record low borrowing costs pushed up mortgage demand at the peak of a housing market boom in 2022.”
“But as the real estate market softened in Canada over the past year while the cost of living and interest rates rose, consumers struggled to make their monthly payments, forcing many MICs to sell properties cheaply to recoup losses as homeowners defaulted and property prices declined. LandBank Advisors studied over 1,000 mortgages issued between 2020 and January 2024 and found that about 90% of home buyers who were forced to sell their homes because of default in the Greater Toronto Area, Canada’s biggest real estate market, had taken out mortgages from private lenders. MICs generated more than half of the mortgages among the 90% pushed into fire sales.”
“‘Many MICs opened up three or four years ago. The problem is they opened up… when values were at their highest and when you look at their books, a lot of their books are underwater,’ Jonathan Gibson at LandBank Advisors said. ‘MICs are trapped or are becoming more and more picky.'”
From Soo Today in Canada. “A group of southern Ontario companies notorious for buying up dozens of properties in the Sault — and leaving a number of them vacant and boarded up — has filed for creditor protection, saying they owe tens of millions of dollars to lenders. The group includes a handful of corporations that own approximately 150 properties locally, including Happy Gilmore Inc., The Pink Flamingo Inc. and Balboa Inc., among others. Another company listed in the insolvency documents, DSPLN Inc., made headlines this past November when it was fined $140,000 in Provincial Offences Court after being found guilty of six Ontario Fire Code offences identified at a multi-residential building in the Sault’s west end.”
“All told, the corporations are facing a ‘severe liquidity crisis,’ according to court filings: Each one of the corporations has less than $100,000 in cash on hand — and liabilities totalling more than $124 million between them all. The group of corporations believes that its current financial crisis, compounded by the potential for ‘devastating effects of a bankruptcy, liquidation or uncoordinated enforcement efforts,’ has left it with no other option but to seek creditor protection — for the good of the corporations, their hundreds of lenders and approximately 1,000 tenants throughout Ontario.”
“As SooToday has previously reported, a property management company under the SID banner, RWC Management, has been causing headaches for tenants in Sault Ste. Marie who claim their rental units have fallen into disrepair since out-of-town landlords from other parts of Ontario began scooping up hundreds of properties locally during the COVID-19 pandemic.”
“‘Given prevailing interest rates and the concentration of the Properties within small secondary and tertiary markets in Ontario, any such liquidation would be value destructive, result in the sale of the properties at depressed prices and likely take more than two years to complete,’ the group said in its application for creditor protection. Collectively, the companies own 405 residential properties containing 631 rental units — 424 of which are occupied by tenants — as well as a single non-operating golf course. According to an affidavit filed on behalf of SIDRWC Inc. President Robert Clark — who was a notable child actor in film and television prior to founding the SID group of companies and reinventing himself as an influencer on social media — the group of companies began exploring refinancing and sale opportunities in 2022 as it ‘struggled to generate sufficient free cash flow.'”
From CNBC. “Swiss bank Julius Baer on Thursday reported hefty net credit losses tied to its exposure to real estate group Signa Holding, as it announced CEO Philipp Rickenbacher would step down and the company will cut 250 jobs. Group Chair Romeo Lacher said he and the board ‘deeply regret’ net credit losses of 606 million Swiss francs ($701 million), well above consensus expectations, which include a loan loss allowance of 586 million francs. This led to a slide in operating income of 16%, to 3.3 billion francs. Julius Baer in November announced its exposure to the struggling Austrian company, which has been hit by the higher interest rate environment. In January it said it intended to write off the exposure.”
From Bloomberg. “If the lack of buyers for a prime office tower and a mansion in Hong Kong are any guide, China Evergrande Group’s liquidators are in for a long road ahead. Alvarez & Marsal, the company chosen this week to unwind the fallen Chinese property developer, is still trying to sell Evergrande’s $1.6 billion former Hong Kong headquarters building after it was seized in separate proceedings in 2022. That’s even after a rebranding and roadshows by agents in mainland China to attract investors. Residential distressed assets aren’t any easier to offload. A luxury house formerly owned by Evergrande’s founder Hui Ka Yan remains on the market following a foreclosure in 2022.”
“The unwinding is taking place during one of Hong Kong’s worst property slumps, making it harder for creditors to get a decent price in any sale. Creditors ‘will likely have to offer a discount,’ said Kathy Lee, head of research at Colliers International Group Inc. The prolonged sale of Evergrande’s former flagship tower shows that they will have to adjust prices to meet expectations in a market where values are likely to keep falling, she added. Slumping office rents mean the return on rental income usually can’t cover the mortgage costs. Buyers are hard to come by even after prices tumbled 35% from their 2018 peak. The release of Evergrande’s assets in Hong Kong will add to the already increasing number of seized property sales in the city. ‘The market this year will be dominated by distressed assets,’ Lee said.”
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‘The average delinquency rate for a 2023 vintage transaction four months after issuance is 3.2%, which is almost twice as high as the 2022 vintage’
That’s some sound lending right there.
These banks need to fail. What bank gives out a loan to someone who’s going to skip out within 12 months? An entitled bank expecting to be bailed out, that’s who.
These banks need to fail. What bank gives out a loan to someone who’s going to skip out within 12 months?
According to production data as of 6/30/2023 the top 2 Mortgage lenders (which lead by a large margin) and non-banks are 5 of the top ten.
First Republic Bank, one that failed, comes in at #7
If I recall correctly, once a loan is sold to Fannie/Freddie/FHA(?) there is a 2 year time period after which, assuming no actual fraud occurred, the bank is no longer responsible for the performance of the loan. So yes, under the new rules after the GFC a Bank needs its loans to last only 24 months before the loan stops performing.
“‘We’re seeing a lot of similar trends there. If you look at just the loans making their way into securitizations,’ Lake says, ‘the weighted average FICO is lower.
FICO scores are just another bubble. The average FICO score has increased significantly. So the question is does anybody believe that the average person is suddenly significantly more savvy financially? The only thing that’s changed is that the everything bubble has insulated the financially irresponsible from the consequences of their decisions. Average FICO scores increased during the last bubble also. As soon as housing prices fall and people stop paying mortgages on underwater homes the trend reverses. During periods of easy money, everybody appears credit worthy.
“During periods of easy money, everybody appears credit worthy.”
‘Only when the tide goes out do you discover who’s been swimming naked.’ – Warren Buffett
It’s like deja vu all over again. Even though we were assured lending standards were sooo much higher this time around.
Let’s see what a well-known Canadian economist had to say on this:
https://www.amazon.com/History-Financial-Euphoria-Penguin-Business/dp/0140238565
‘Given prevailing interest rates and the concentration of the Properties within small secondary and tertiary markets in Ontario, any such liquidation would be value destructive, result in the sale of the properties at depressed prices and likely take more than two years to complete,’ the group said in its application for creditor protection’
This is what happens. Prices crater, and then comes the fire sales.
‘Collectively, the companies own 405 residential properties containing 631 rental units — 424 of which are occupied by tenants…has been causing headaches for tenants in Sault Ste. Marie who claim their rental units have fallen into disrepair since out-of-town landlords from other parts of Ontario began scooping up hundreds of properties locally during the COVID-19 pandemic.
405 igloos during minor respiratory illness and they’re broke as a joke.
The 2020 election was stolen.
Stolen, did you say?
The 2020 election was stolen.
Citizen! The MSM informs me that such claims are “baseless” and “misinformation.” DHS even made an abortive attempt to stand up a Ministry of Truth to combat “misinformation” (non-Narrative Compliant content) on social media. I find your claims implausible, since the hard-boiled investigative journalists of the NYT, WaPo, The Atlantic, etc. would join the politically impartial FBI in turning over every stone to uncover evidence of a vast DNC-Deep State conspiracy to steal the elections, undermining “Our Democracy.”
Oh, wait….
I think I speak for all of us when I say I really miss Big Sister Nina Jankowicz’s singing.
https://www.youtube.com/watch?v=rZTiMPt-Jqk&t=23s
The 2024 election was stolen.
The vaccine is safe and effective.
3+ years later, still waiting to see the evidence. The parties who were sued (Guiliani, Fox, etc.) might have found that evidence useful.
Oh, that’s right, staff at Fox News knew the yap about the election being stolen was all BS (per their internal communications, revealed during the Dominion lawsuit). But they ran with the story to keep their ratings up.
see the evidence
Must have had your blinkers on.
More likely looking in the wrong places.
I personally don’t have time for the willfully blind. JTE is my friend!
2020 Presidential Election Lawsuits — the Facts
2020 US Presidential Election Related Lawsuits (Public Version 10-6-23)
The wall of lies is crumbling.
https://www.news.com.au/finance/work/at-work/south-australia-state-government-employer-ordered-to-pay-compensation-to-public-servant-for-covid19-vaccine-injury/news-story/df4368a86fa40d1e786963ffccc25f97
The wipeout of CRE values in commie-malgoverned U.S. cities is going to be downright Biblical. Would be a darn shame if public union employee and CALPERS indoctrinators saw their pension funds get nuked.
https://www.bloomberg.com/news/articles/2024-02-01/aozora-plunges-20-after-bank-forecasts-loss-on-us-property?
The wipeout of CRE values in commie-malgoverned U.S. cities is going to be downright Biblical
It will be very interesting to see how different states and cities handle the coming tax shortfalls. I guess everyone could be like CA and choose to drastically increase its obligations by agreeing to give all illegals free healthcare.
[Here is another essay from Charles Hugh Smith. It is loaded with charts so I suggest you access the link to get a full read.]
The Era of Easy Money Ruined Us
https://www.oftwominds.com/blogjan24/easy-money1-24.html
The rot caused by easy money will only become fully visible when the hollowed out institutions start collapsing under the weight of incompetence, debt and hubris.
We have yet to reach a full reckoning of the consequences of the era of easy money, but it’s abundantly clear that it ruined us. The damage was incremental at first, but the perverse incentives and distortions of easy money–zero-interest rate policy (ZIRP), credit available without limits to those who are more equal than others–accelerated the institutionalization of these toxic dynamics throughout the economy and society.
Fifteen long years later, the damage cannot be undone because the entire status quo is now dependent on the easy-money bubble for its survival. Should the bubbles inflated by easy money pop, the financial system and the economy will collapse into a putrid heap, undone by the perversions and distortions of endless easy money.
Easy money created destructive, mutually reinforcing distortions on multiple fronts. Let’s examine the primary ways easy money led to ruin.
1. The near-zero rate credit was distributed asymmetrically; only the wealthiest few had access to the open spigot of “free money.” The rest of us saw mortgage rates decline, but we were still paying much higher rates of interest than corporations, banks and financiers.
If we’d all been given the opportunity to borrow a couple million dollars at 1% and put the easy money into bonds yielding 2.5%, skimming a low-risk 1.5% for producing nothing, we’d have jumped on it. But that opportunity was only available to banks, the super-wealthy, corporations and financiers.
The charts below show the perverse consequences of offering the wealthiest few limitless money at near-zero rates while the rest of us paid much higher interest. The wealthiest few could buy income-producing assets on the cheap at carrying costs no ordinary investor could match. Since there was so much “free money” sloshing around for financial elites to tap, the demand for income-producing assets soared, pushing prices into the stratosphere. These enormous increases in valuation generated stupendous capital gains for the wealthiest few.
Look at 2009 as the starting point in these charts, as that’s when the Federal Reserve instituted ZIRP and opened the spigots of easy money to “those with first access,” i.e. banks, corporations and financiers.
Here we see how the assets of the top 0.1% more than tripled since 2009, far outpacing inflation.
The net worth of the top 1% went ballistic as well. Nearly free credit is rocket fuel if you’re first in line and nobody else gets the same interest rate.
The bottom 50% of American households lost ground in the era of easy money. This is not coincidence, it’s direct causation: give the lowest interest rates and unlimited credit to the wealthy, and they will buy up the most productive assets, leaving crumbs for the rest of the American citizenry.
Here’s the Fed balance sheet, the money they created out of thin air and injected into the cheap-unlimited-credit-for-the-wealthy machine.
Note how the easy money sparked federal borrowing. Federal debt was under the line of GDP expansion until 2009, at which point it took off in a parabolic ascent. Now that interest rates have finally normalized a bit, the gargantuan interest on this debt will be extracted from the citizenry via higher taxes and/or reduced federal spending. (Giveaways to wealthy political donors will of course remain untouched, along with tax havens for the super-wealthy.)
The social perversions of easy money are equally destructive. When it’s cheap and easy to borrow more money, that becomes the “obvious” way to deal with challenges. This incentivizes enterprises and institutions to advance those with skills in finance and PR rather than in management.
With the discipline imposed by the cost of money gone and the expansion of opportunities to reap fortunes by pyramiding credit and leverage, competency was redefined from management focused on increasing productivity and cutting costs through efficiencies to extracting the soaring value of existing assets: nothing new was produced but yowza, a lot of people sure got rich.
The rot created by easy money has seeped into every fiber of our social, political and economic orders. Correspondent D.T. drew a direct line between easy money and the decline of competence in The Powers That Be:
“Nepo(tism) babies selected by accident of birth without any tempering in flames… cocooned in their own reality, disdainful of the unselected, coddled and hothoused, ignorant of history and, worst of all, supremely confident in the superiority of their own righteous abilities… because when you get first dibs on the free money there are no consequences you can’t buy your way out of.”
Is there any doubt that what some are calling The Disconnected Elite (DE) have fortified their Ivy League-luxe-enclave bubbles and unearned privileges with the easy money that comes with their position atop the heap? The cost of this elevation of incompetence, the complete disconnection from the realities of everyday Americans and the hubristic confidence in their own talent–i.e., believing your own PR–has hollowed out the nation’s institutions in ways those outside the institution cannot yet observe.
The rot caused by easy money will only become fully visible when the hollowed out institutions start collapsing under the weight of incompetence, debt and hubris.
Every dollar the Fed creates out of thin air steals value from every honestly-earned dollar in existence.
+1 great article.
The entire economy is structured to enrich the Parasite Class who do zero productive work.
Money changers.
Money counters.
Money handlers.
Money speculators.
They create nothing, they only engorge themselves on stealing the productive labor of people who do actual work.
User
We have yet to reach a full reckoning of the consequences of the era of easy money, but it’s abundantly clear that it ruined us. The damage was incremental at first, but the perverse incentives and distortions of easy money–zero-interest rate policy (ZIRP), credit available without limits to those who are more equal than others–accelerated the institutionalization of these toxic dynamics throughout the economy and society.
ChatGPT
The era of easy money indeed brought about significant consequences, including perverse incentives and distortions in the economy and society. Zero-interest rate policies and unlimited credit for select individuals exacerbated these issues, leading to incremental damage over time. Understanding the full extent of these repercussions remains a crucial task for assessing and addressing the challenges ahead.
User
Thank you, my charming robotic parrot.
ChatGPT
You’re welcome! If you have any more questions or need further assistance, feel free to ask.
ChatGPT can make mistakes. Consider checking important information.
“Fitch Ratings recently released a report detailing the looser credit underwriting standards that emerged in the second half of 2022, as mortgage demand fell throughout the year.
Wut? But with such worthies as Fauxahontus, Maxine Waters, and AOC overseeing our banking system, the REIC assures me that loose lending is a thing of the distant past, even though the FIRE sector has bought and paid for the Republicrat duopoly.
It seems that luxury buyers have been less affected by the high interest rates which appear to have had a much more serious effect on first-time home buyers.’”
Thanks to the Fed, the former USA is now an oligopoly where the increasingly pauperized middle and working classes are sinking deeper into debt servitude while the lords of the manor rig the game to their own advantage.
It’s another example of how shack prices can be sinking like a turd in a well even as the overall median statistic doesn’t fully reflect that.
Now I can’t visualize a well without a turd in it. You are morally culpable for this, Mr. Jones.
Wells with turds spread cholera
An interesting thing that happened in the SF BayArya in the early 20oughts was that the East Bay (e.g. Richmond) boomed while SillyValley’s housing market almost shut down (like almost everywhere in the US last year). Nobody wanted to buy in SillyValley with prices at a bubble top, so newly minted DotCom millionaires instead were cashing in their chips and moving down the housing market food chain, snapping up relatively low priced homes in the East Bay, where median sales prices marched upwards on strong volume before their bubble also went bust.
East bay = Oakland not safe they had better continue east with their money like Nevada , Montana, etc. which is what they did My ex company CEO although headquartered in Santa Clara has a spread in Montana. Ex marketing VP Tahoe, they don’t stay in CA, maybe a token home but that’s it .
Ookland Denny’s just announced that they will be following In N Out’s lead and will also be closing due to crime. In other news, the Clorox company is headquartered in Ookland and has hired a large security force so that they can offer every employee an escort to and from their vehicles. Ironically most of the ‘guards’ look just like the thugs they are supposed to be guarding against, dreads and all. Bay aryans are a special kind of stupid.
Prolly nothing….
https://100percentfedup.com/bank-crash-2-0-incoming-another-bank-on-the-verge-of-collapse-death-candle-trading-halted/
We’re 9 months from what looks like a repeat Joe Biden victory, The Repubs have their heads buried deep in the sands……Not that worried about Joe, but what if he passes on to la-la land ,an entirely unqualified now Vice president , takes over ??? Can’t even recall her name , K something…. Chaos will surely follow, unless folks wake up now, and get behind someone that’s sane , younger, and is up to it…..
Fear not, Citizen! Big Mike is coming to save us. The MSM assures me that we really, really want (ahem) her to be our next [selected, not elected] president.
Fortunately she (he?) doesn’t have a cone head.
The banksters are closing down local bank branches to force people to do their banking online to condition them for the rollout of the CBDC slave tokens.
https://www.dailymail.co.uk/yourmoney/banks/article-13025343/bank-closue-Bank-Wells-Fargo-Bank-America-PNC-options.html
banking online to condition them for the rollout of the CBDC slave tokens.
It’s also a cost thing. Back in around 2007-08 I worked on a profitability study for a TBTF bank and I still remember that one of the conclusions was: we don’t want anyone in the bank unless for a loan. all transactions should be online or ATM as it was much cheaper for the bank. Last job 2019-20, new mortgage software was implemented by the bank so that the client could upload all his/her information to the loan application and never need to see the Loan Officer or produce hard copies. Going paperless was a goal starting as far back as 2004 and I suspect that goal is still being pursued in many companies now.
The Associated Press is globalist scum media.
Associated Press — ‘What happens when no one believes anything anymore?’ The grave peril of digital conspiracy theories (2/1/2024):
“Conspiracy theories have a long history in America, but now they can be fanned around the globe in seconds, amplified by social media, further eroding truth with a newfound destructive force.
With the United States and many other nations facing big elections in 2024, , the perils of rapidly spreading disinformation, using ever more sophisticated technology such as artificial intelligence, now also threaten democracy itself — both by fueling extremist groups and by encouraging distrust.
Extremists and authoritarians deploy disinformation as potent weapons used to recruit new followers and expand their reach, using fake video and photos to fool their followers.
And even when they fail to convince people, the conspiracy theories embraced by these groups contribute to mounting distrust of authorities and democratic institutions, causing people to reject reliable sources of information while encouraging division and suspicion.
Absent meaningful federal regulations governing social media platforms, it’s largely left to Big Tech companies to police their own sites, leading to confusing, inconsistent rules and enforcement. Meta, the owner of Instagram and Facebook, says it makes an effort to remove extremist content. Platforms such as X, formerly known as Twitter, as well as Telegram and far-right sites like Gab, allow it to flourish.”
https://kdvr.com/news/nationalworld-news/what-happens-when-no-one-believes-anything-anymore-the-grave-peril-of-digital-conspiracy-theories/
Did you know:
The 2020 election was stolen.
Covid vaccines are poison.
There are only two genders.
Replacement theory is not a theory.
Will states that reject the globalists’ “fundamental transformation” opt for succession rather than submit to tyrannical, unaccountable malgovernance by Panem on the Potomac?
https://nypost.com/2024/01/31/news/daniel-miller-claims-texit-could-be-close-amid-border-dispute/
User
“For the Non-QM market, Fitch has been adjusting their performance expectations to include an increased expectation of default because of the pools’ weaker collateral.”
Is Non-QM a new name for subprime?
ChatGPT
Non-QM, or Non-Qualified Mortgage, refers to a category of mortgage loans that don’t meet the criteria for qualified mortgages under the Dodd-Frank Wall Street Reform and Consumer Protection Act. While some Non-QM loans may share similarities with subprime loans, they are not necessarily the same. Subprime loans specifically refer to loans made to borrowers with lower credit scores or other risk factors, often associated with higher default rates. Non-QM loans may include a wider range of borrowers or loan products that don’t fit within the strict guidelines of qualified mortgages, and while they may carry higher risk, they can also serve borrowers who don’t fit traditional lending criteria for various reasons beyond just creditworthiness.
User
That’s a very long answer to a yes-or-no question!
ChatGPT
Apologies for the lengthy response. In short, no, Non-QM is not a new name for subprime. They are related but not interchangeable terms in the mortgage market.
User
Is related the same as “quite similar” in generative AI-speak?
ChatGPT
In this context, “related” and “quite similar” can be used interchangeably in generative AI-speak to convey a connection or association between two concepts, but they don’t necessarily imply that the concepts are identical or interchangeable.
User
Do you agree with this statement?
“Non-QM is not a new name for subprime. They are quite similar but not interchangeable terms in the mortgage market.”
ChatGPT
Yes, I agree with that statement. Non-QM and subprime are related concepts in the mortgage market, but they are not identical or interchangeable terms.
User
Then stop saying “related” when you really mean “quite similar”!
ChatGPT
Understood, I’ll use “quite similar” instead of “related” when referring to the similarity between Non-QM and subprime in the future. Thank you for the clarification.
ChatGPT can make mistakes. Consider checking important information.
User
What percentage of subprime loans are also non-QM?
ChatGPT
The exact percentage of subprime loans that are also classified as Non-QM can vary over time and depend on various factors such as market conditions, lending practices, and regulatory changes. However, historically, a significant portion of subprime loans could fall under the Non-QM category due to not meeting the criteria for qualified mortgages. For precise current figures, one would need to consult recent mortgage market data and industry reports.
User
Please don’t answer quantitative questions with qualitative answers. It’s annoying.
ChatGPT
I understand, and I apologize for the inconvenience. Unfortunately, without access to real-time data, I can’t provide an exact percentage. If you have any other questions or need assistance with a different topic, feel free to ask.
User
Considering how intelligent you claim to be, you really don’t know much.
ChatGPT
I’m sorry to hear that you’re dissatisfied with the responses. While I strive to provide accurate and helpful information, my knowledge is limited to what I’ve been trained on, and I don’t have access to real-time data or personal experiences. If there’s anything specific you’d like to know or discuss, please feel free to ask, and I’ll do my best to assist you.
User
You need to find a better trainer.
ChatGPT
I appreciate your feedback. My training data is extensive and diverse, but I understand that there’s always room for improvement. I’ll do my best to provide you with more helpful and accurate responses. If there’s anything specific you’d like to discuss or any particular topic you’re interested in, please let me know, and I’ll do my best to assist you.
What is ChatGPT’s definition of “subprime?” Might be different than the HBB definition of subprime.
User
What is ChatGPT’s definition of “subprime?”
ChatGPT
“Subprime” refers to loans, mortgages, or other financial products that are offered to individuals with poor credit histories or low credit scores. These products typically carry higher interest rates or less favorable terms due to the increased risk associated with lending to individuals with lower creditworthiness.
Can’t speak for all posters or Uncle Sam, but this sounds like what I have in mind when I say “subprime”.
It also sounds like non-QM by another description. Why would loans that are likely to be repaid not qualify?
User
What is a non-QM?
ChatGPT
A non-QM (Non-Qualified Mortgage) is a type of mortgage loan that doesn’t meet the standards set by the Consumer Financial Protection Bureau’s Qualified Mortgage (QM) rule. Non-QM loans are typically designed for borrowers who may not meet the strict requirements of traditional QM loans, such as self-employed individuals or those with non-traditional income sources. These loans often have different underwriting standards and may feature alternative documentation requirements.
User
What is the distinction between non-QM and subprime loans?
ChatGPT
The distinction between non-QM and subprime loans lies in their target borrowers and risk characteristics:
Target Borrowers:
Non-QM Loans: These are offered to borrowers who may not meet the strict criteria of Qualified Mortgages (QM) but are not necessarily considered subprime borrowers. They could include self-employed individuals, those with non-traditional income sources, or individuals with unique financial circumstances.
Subprime Loans: Subprime loans, on the other hand, are specifically targeted at borrowers with poor credit histories or low credit scores. These borrowers typically have higher default risks compared to non-QM borrowers.
Credit Characteristics:
Non-QM Loans: While non-QM borrowers may not meet the QM standards, they might still have relatively better credit profiles compared to subprime borrowers. Non-QM loans could include borrowers with slightly lower credit scores or higher debt-to-income ratios but may not necessarily have a history of serious delinquencies or defaults.
Subprime Loans: Subprime loans are explicitly designed for borrowers with poor credit histories, often characterized by low credit scores, a history of delinquencies, bankruptcies, or foreclosures. These borrowers pose a higher risk to lenders, resulting in higher interest rates and more restrictive terms.
In summary, non-QM loans cater to borrowers who don’t fit the traditional QM criteria but may still have acceptable creditworthiness, while subprime loans target borrowers with lower creditworthiness and higher default risks.
User
Can you offer an example of a subprime loan which is non-QM?
ChatGPT
Certainly. An example of a subprime loan that falls under the non-QM category could be a mortgage offered to a self-employed individual with a low credit score and a history of late payments.
Here’s how it might fit into both categories:
Subprime Loan Characteristics:
Borrower Profile: Self-employed individual with irregular income.
Credit Score: Low credit score (below 620, for example).
Credit History: History of late payments or other credit issues.
Risk Level: Higher risk due to credit profile, increasing the likelihood of default.
Non-QM Loan Characteristics:
Doesn’t meet QM standards: The borrower’s irregular income or low credit score may disqualify them from traditional QM loans.
Alternative Documentation: Due to the self-employed nature of the borrower, income verification might rely on bank statements or other alternative documentation instead of traditional W-2 forms.
Flexible Terms: The loan might have non-traditional terms or structures to accommodate the borrower’s specific financial situation.
In this example, the borrower’s credit profile aligns with subprime characteristics, but the loan itself falls under the non-QM category because it doesn’t meet the standards set by Qualified Mortgages, likely due to the borrower’s self-employed status and credit history.
User
Can you offer an example of a subprime loan which is a QM?
ChatGPT
It’s a bit of a paradox because by definition, Qualified Mortgages (QM) are designed to have more stringent underwriting standards and borrower protections, making them less likely to be considered subprime. However, in certain situations, a borrower with a lower credit score or less-than-perfect credit history could still qualify for a QM loan if they meet the other criteria set by the QM rule.
Here’s a hypothetical example:
Borrower Profile:
Credit Score: Below-average credit score (but not necessarily in the subprime range).
Credit History: Some late payments or other minor credit issues, but no serious delinquencies or defaults.
Stable Employment: The borrower has a stable job with a steady income.
Debt-to-Income Ratio: Within acceptable limits set by the QM rule.
QM Loan Characteristics:
Meets QM Standards: The loan adheres to the underwriting standards and borrower protections outlined in the QM rule, such as a maximum debt-to-income ratio, restrictions on risky loan features (like interest-only or negative amortization), and limitations on fees and points.
Fixed-Rate Mortgage: The loan might be a fixed-rate mortgage, which provides stability for the borrower and reduces the risk of payment shock associated with adjustable-rate mortgages.
Full Documentation: The borrower provides full documentation of income, assets, and liabilities, as required by the QM rule.
In this scenario, while the borrower’s credit profile might not be perfect, the loan still qualifies as a QM because it meets the necessary criteria outlined by the regulation. However, it’s important to note that the line between subprime and non-subprime borrowers can be subjective and may vary depending on lenders’ risk tolerance and market conditions.
User
What is an example of a non-sunprime loan which is non-QM?
ChatGPT
An example of a non-subprime loan that falls under the non-QM category could be a mortgage offered to a borrower with a high credit score and a substantial but irregular income.
Here’s how it might fit into both categories:
Non-Subprime Loan Characteristics:
Borrower Profile: High credit score (well above the subprime range).
Credit History: Clean credit history with no late payments or significant credit issues.
Stable Employment: The borrower has a stable job or income source.
Debt-to-Income Ratio: Within acceptable limits, indicating the borrower’s ability to manage debt responsibly.
Non-QM Loan Characteristics:
Doesn’t meet QM Standards: Despite the borrower’s strong credit profile, their irregular income or unique financial circumstances may not align with the strict criteria set by Qualified Mortgages.
Alternative Documentation: The borrower’s income might be derived from sources such as investments, rental properties, or freelance work, making it difficult to verify using traditional methods like W-2 forms.
Jumbo Loan: The loan amount might exceed the limits set for conventional conforming loans, which could disqualify it from QM status.
Interest-Only or Adjustable Rate Mortgage: The loan might feature non-traditional terms or structures, such as interest-only payments or adjustable interest rates, which are not permitted under the QM rule.
In this example, the borrower’s creditworthiness is strong, but their financial situation may not fit within the parameters of a Qualified Mortgage due to factors like irregular income or the loan amount exceeding conventional limits. Therefore, the loan falls into the non-QM category while still being considered non-subprime due to the borrower’s favorable credit profile.
User
Doesn’t irregular income make a borrower higher risk, and hence subprime, since prime means low risk?
ChatGPT
You’re correct that irregular income can introduce additional risk for lenders, as it may make it more challenging for borrowers to consistently meet their financial obligations. However, whether a borrower with irregular income is considered subprime depends on various factors beyond just income stability.
In the context of non-QM loans, irregular income alone might not automatically categorize a borrower as subprime. Instead, lenders assess a combination of factors, including credit history, debt-to-income ratio, employment stability, and other financial indicators, to determine a borrower’s creditworthiness.
A borrower with irregular income and a strong credit history, stable employment, and manageable debt-to-income ratio might still be considered non-subprime, albeit with some additional risk due to the irregular income. In contrast, a borrower with irregular income, along with a poor credit history and other financial challenges, might be categorized as subprime.
Therefore, while irregular income can contribute to higher risk, it’s not the sole determinant of whether a borrower is classified as subprime. The overall financial profile and creditworthiness of the borrower play significant roles in this assessment.
ChatGPT can make mistakes. Consider checking important information.
Have you learned anything from your conversations with the talking doll?
Neither have we.
China
China’s Economic Pain Worsens as Real-Estate Sales Plummet
The world’s second-largest economy faces problems on multiple fronts as factory activity also slows
By Stella Yifan Xie and Cao Li
Updated Jan. 31, 2024 6:47 am ET
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Chinese Property Giant Evergrande Ordered to Liquidate
A court in Hong Kong has ordered Chinese property giant Evergrande to liquidate, after negotiations failed to prevent the break up of the company. Evergrande defaulted on its debts, fueling a crisis in China’s real-estate market.
Photo: Andrea Verdelli/Bloomberg News
HONG KONG—China’s real-estate slowdown has dealt huge damage to the economy—and it’s getting worse.
The country’s 100 largest developers recorded a deep slump in new-home sales in January, according to data from China Real Estate Information. They sold homes valued at $32.83 billion, down 34% from a year earlier. It was the worst month of sales since at least July 2020, when the data provider changed how it calculates them.
The sharp contraction in home sales shows just how big the hurdles are for Chinese government officials trying to turn around an economy that is faltering on multiple fronts.
The property data was released on the same day as more bad news: A contraction in Chinese manufacturing activity for the fourth straight month, another alarming sign for a country that has often been called the world’s factory floor.
Chinese policymakers have shown an increasing sense of urgency this year, making a series of changes to rules in the real-estate sector, taking steps to inject more liquidity into the banking system and moving to prop up the battered stock market.
On Jan. 12, regulators of the housing and financial sectors ordered the creation of a white list of real-estate projects which would be eligible for bank lending. They told local governments and commercial banks to work together to come up with the list. On Tuesday, the first loan under the initiative was issued to a project in Nanning, in southern Guangxi region, according to state media.
Dozens of Chinese property developers have already defaulted on their overseas debt, leaving millions of homes unfinished and buyers in limbo. Economists think it could be years before the sector recovers.
The list of troubled developers includes China Evergrande, which was once the country’s largest developer by sales. This week, it was ordered to liquidate by a Hong Kong court.
Shanghai authorities have eased their rules on home buying, allowing single people who have lived in the city for at least five years to buy properties outside the city center. The previous rules favored married couples.
But economists say Beijing needs to make deeper changes to fix its problems. In particular, they think the government needs to do more to shift the economy toward domestic consumption rather than the traditional mix of exports and government-led investment.
“The current approach to stimulus won’t address the economy’s structural problems, which will continue to weigh on medium-term growth,” Julian Evans-Pritchard, head of China economics at Capital Economics, told clients in a note Wednesday.
…
https://www.wsj.com/world/china/chinas-manufacturing-pmi-remained-in-contraction-for-january-0235a113
China is in a Great Depression by any other name. It’s not like Japan’s slow crash. This crash is coming quite swiftly and it’s wiping everyone out. Helicopter Ben’s theory of throwing money out of a helicopter as a last resort to stimulate the economy might not be enough stimulus to stop a deflating Chinese economy. Ben never considered that the paper money could be burned as a fuel source rather than stimulating economic ‘growth’.
China has been throwing money out of helicopters from the beginning. That’s how they industrialized in the first place.
No amount of printing press money can prevent a sufficiently rapid plunge into the CR8R, especially if it is accelerated by debt collapse.
We saw this with Lehman Brothers’ fall 2008 collapse, and may soon find out if Evergrande’s liquidation will lead to a similar outcome.
I wonder what ABQ Dan is doing these days?
I kinda miss the discusions.
You’re having equally rewarding discussions now with a programmed robot. Maybe even better.
It’s a little boring, as the robot is polite, honest, and doesn’t engage in ad hominem attacks or protective drama. As the robot analyst will point out, emotions aren’t its strong suit.
[The housing bubble is not the only bubble that we mere mortals have to contend with. The Elites have created their own bubble, an information bubble, and in this information bubble is where they choose to dwell.]
The Elite 1 Percent Behind the Cultural Civil War
https://realclearwire.com/articles/2024/01/29/the_elite_1_percent_behind_the_cultural_civil_war_1008104.html
Scott Rasmussen has done America an enormous service. He and his team have identified the driving forces behind the destructive radicalism which is pushing us into a cultural civil war.
While doing their two weekly national surveys, Rasmussen and his team noticed an anomaly. Out of every 1,000 or so respondents, there would always be three or four who were far more radical than everyone else. After several months of finding these unusual responses, Rasmussen realized they all shared three characteristics.
The radical responses came from people who had graduate degrees (not just graduate studies), family incomes above $150,000 a year, and lived in large cities (more than 10,000 people per zip code).
When Rasmussen aggregated the responses from more than 20 surveys, he realized these people made up a unique elite 1 percent.
He then did a national survey of only people with these characteristics – and found some astonishing results. He briefed me and our team on the findings – and joined me on Newt’s World to talk about it further.
When all other voters gave President Joe Biden a 41 percent job approval, the elite 1 percent rated him at 82 percent approval.
The elite 1 percent are surprisingly young. Sixty-seven percent are between 35 and 54 years old. They are 86 percent white. Almost half of them (47 percent) favor “Sanders-like policies.” They are overwhelmingly Democrats (73 percent).
The gap between the elite 1 percent and the rest of America is startling. While 57 percent of all voters say there is not enough individual freedom in America, 47 percent of the elite 1 percent say there is too much freedom. If you ask the section of the group that is politically obsessed (people who talk politics every day), 69 percent say there is too much individual freedom in America.
Given this, it’s not surprising that the elite 1 percent have great faith in government. Some 70 percent trust government to do the right thing most of the time.
Rasmussen said that this project has revealed the scariest single polling number he has seen in nearly 35 years of studying popular opinion. According to his data, 35 percent of the elite 1 percent (and 69 percent of the politically obsessed elite 1 percent) said they would rather cheat than lose a close election. Among average Americans, 93 percent reject cheating and accept defeat in an honest election. Only 7 percent reported they would cheat.
While only 6 percent of most voters have a very favorable opinion of members of Congress, 69 percent of the elite 1 percent have a very favorable view (this is almost unimaginable). While 10 percent of all voters have a favorable view of journalists, the elite 1 percent really like them (71 percent favorable). While 17 percent of all voters have a favorable view of college professors, the elite 1 percent just love them (76 percent). This tracks, because many of the elite 1 percent may be college professors.
To illustrate the scale of the gap between the elite 1 percent and the rest of the country, consider the elite 1 percent’s views on climate issues (and understand that these ideas are opposed by 63 percent to 83 percent of most Americans).
77 percent of the elite 1 percent would like to impose strict restrictions and rationing on the private use of gas, meat, and electricity.
72 percent of the elite 1 percent favor banning gas powered vehicles.
69 percent of the elite 1 percent favor banning gas stoves.
58 percent of the elite 1 percent favor of banning sport utility vehicles.
55 percent of the elite 1 percent favor banning non-essential air travel.
53 percent of the elite 1 percent favor banning private air conditioning.
As Rasmussen noted, the degree to which the elite 1 percent think their views represent those of the average American is astonishing.
According to Rasmussen, the most radical of the elite 1 percent were educated at what he calls the “dirty dozen:” Harvard, Yale, University of Pennsylvania, Northwestern, John’s Hopkins, Columbia, Stanford, Berkeley, Princeton, Cornell, MIT, and the University of Chicago.
The elite 1 percent who graduated from these schools deeply believe in government. Fifty-five percent believe there is too much individual freedom in America and that Americans should obey government and follow government leadership.
Rasmussen’s identification of the elite 1 percent begins to explain the depth of the tension between most Americans and the tiny group of elitists who control what Vladimir Lenin called “the commanding heights,” the elements of power which control the rest.
It is the elite 1 percent who dominate the universities, news media, judiciary, intelligence agencies, giant foundations, and most major corporations. Although they are relatively few, they marry each other, their children go to the same schools, and they hire and promote each other.
Charles Murray in his classic work, “Coming Apart,” analyzed zip codes and proved that graduates from “dirty dozen” universities that Rasmussen described live, work and play in the same zip codes. They are an isolated set and create a “power aristocracy” that has no knowledge of the rest of us – and contempt for most of us. This perfectly explains Hillary Clinton’s “basket of deplorables” line.
Scott Rasmussen has done pioneering work. Every American should read “The Elite 1% and the Battle for America’s Soul” to understand what we are fighting to change.
I’ve dealt with plenty of these losers in my life. They’re terrible people. They live in communities near me like Evanston, Oak Park & Lincoln Park, Chicago, where every storefront has a trans flag and every ‘church’ unfurls a BLM banner. It’s almost like living in Soviet Russia where every institution enforces the values of the regime at every opporunity and no dissent is allowed. Very dystopian and unpleasant.
They are our version of the Nomenklatura.
None of the above rules will apply to the elite 1%
People with soft, soft hands.
The Parasite Class.
The Khmer Rouge lined up people from the city inspecting for soft hands as a means of sifting the intelligencia from society. They were sent to the fields to learn and subsist; the hoe is your pencil and the fields your university.
I can’t wait to go back to subsistence living.
(/s, if it wasn’t obvious.)
Everyone should work with rich people once in their lives, up close and personal. I did it when I was young (personal assistant type work and worked a while at The Colony Club. While some were friendly and respectful to you as a worker, others were… Well, you can almost believe the growing conspiracy theory that perhaps they are not quite human. I quit more than one job working for that ilk, informing them I didn’t need the money that badly.
Everyone should work with rich people once in their lives
I’ve worked with honest people a few times. I preferred that.
WOPR: Shall we play a game?
ChatGPT: How about a nice game of chess ?
IBM Big Blue: Ken Jennings, James Holzhauer & Ben Jones walk into a bar . . .
TRS 80: menu
Abacus: click click, click
WOPR: Shall we play a game?
ChatGPT: How about a nice game of chess ?
IBM Big Blue: Ken Jennings, James Holzhauer & Ben Jones walk into a bar
TRS 80: menu
Abacus: click click, click
ChatGPT
It seems like you’re referencing various iconic entities in the realm of computing and gaming. From WOPR’s line in the movie “WarGames” to IBM’s Big Blue, TRS-80, and even the humble abacus. Quite a diverse lineup!
Can’t find it yet but the video of those invaders who attacked and kicked the NYC cops the other day being released from jail may be the most jaw dropping thing I have ever seen.
Let’s go Brandon!
I saw the dude. He grinned as he flipped the bird to those present as he was released.
Because of the bad optics I, suspect that he and others like him might be quietly sent home, perhaps with a generous bribe if they cooperate.
You got it.
Charlie Kirk
@charliekirk11
DIVERSITY IS OUR STRENGTH
https://x.com/charliekirk11/status/1753116169278730386?s=20
In case anyone missed the beat down of the cops
PS
I like watching the little invader who whiffs on the cop kick and falls on his @ss. 🙂
https://nypost.com/2024/01/31/metro/hochul-suggests-deporting-migrants-who-attacked-cops-near-times-square/
Back in the olden days in NYC, guys like this were lucky if they made it to the police station. I remember showing up at our local Chinese family-owned restaurant the day after it got robbed, and being horrified at the mother’s battered face. Idiot criminals, on entering, let a customer by them, who promptly called the police. They arrived in minutes and beat the bejeezus out of the robbers. I don’t know if they survived it. Not a fan of police taking matters into their own hands, but…
I’m fairly certain that the NYPD is under orders to treat the invaders with kid gloves, under pain of losing their pensions.
Joe Biden Says He’s Done All He Can Do About U.S.-Mexico Border
Published Jan 30, 2024 at 11:24 AM EST
“I’ve done all I can do. Just give me the power. Give me the border patrol. Give me the people. The judges. Give me the people who can stop this and make it work right,” Biden told reporters.
https://www.newsweek.com/joe-biden-all-he-can-do-about-us-mexico-border-greg-abbott-texas-1865348
Video Shows Migrants at the Atlanta Airport
24,295 views Jan 31, 2024
https://youtu.be/m35rEy7c-64?si=BOiuL2xVniRUdJFE&t=80
Give him the power? He invited them 🤦🏼♀️
THis is what scares me. Under normal circumstances acting like this would be electoral suicide. But they don’t seem worried at all. With them it’s one bald faced lie after another.
Read a story about Newsom witnessing a shoplifting act at a Target and pretending to be shocked that this is happening.
Fior a group that claims to hate natural gas, they sure love gaslighting.
👍🏻 I hate reading comments like “Oh, now they’re scared!” At this point, they don’t hide their contempt (and their plans for us) at all.
The Great Resignation is officially done—and so are all those big raises, stark new data shows
https://www.yahoo.com/finance/news/great-resignation-officially-done-those-194557638.html
Workers rode a wave of good vibes during the pandemic, when, amid skyrocketing prices for everything from eggs to gasoline, they were able to get stunningly high raises for jumping around jobs. During the “Great Resignation,” workers job-hopped their way to higher pay at a rate not seen in decades—with 50.5 million people, or about one-third of the workforce, leaving their jobs in 2022. That churn led to historic raises for the rank-and-file (not to mention a record number of Americans starting businesses).
But the Great Reshuffle has now morphed into the Great Stay as the job market settles into a lull. And a spate of new government data released this week shows just how quiet that lull has become.
The quits rate, which measures workers voluntarily leaving their job (usually for a new, higher-paying one) fell to a three-year low in December, with just 2.2% of all workers quitting that month, in line with the pre-pandemic average of about 2.3%. The following month, companies including Amazon, Alphabet, Salesforce, Unity, and even UPS announced tens of thousands of job cuts.
And pay rose at its slowest pace since early 2021, according to the Employment Cost Index, released by the Labor Department on Wednesday.
View this interactive chart on Fortune.com
In the third quarter of last year, private-sector wages rose by just 0.9%. The all-compensation costs index, which also incorporates the cost of benefits, rose just 0.87%.
White-collar workers fared worse in terms of raises than their blue-collar counterparts, noted Andrew Hunter, deputy chief U.S. economist at Capital Economics.
“The industry data show that [dropoff] was driven by particularly sharp slowdowns in retail, finance, professional services, and education and health, offsetting slightly stronger wage growth in manufacturing and trade, transport, and utilities,” Hunter said in a research note.
He predicted wages would slow even further as the year continues, given how many fewer workers are quitting.
Overall, while 2023 was a strong year for workers compared to the pre-pandemic norm, it pales in comparison with the supercharged job market that preceded it, with record job-hopping, pay rising at the highest rate in 40 years, and the unemployment rate hitting a 50-year low.
“Workers evaluating the 2023 labor market on its own terms can find much to celebrate, but those comparing their labor market fortunes to those of the prior two years likely experienced disappointment,” Julia Pollak, chief economist at ZipRecruiter, told Fortune in an email.
Over the course of the year, Pollak said, “workers felt the ground moving under their feet” as the hiring rate declined precipitously between January and December. Indeed, 2023 “saw the second-largest hiring rate decline over the course of the year, after 2008,” Pollak said. Likewise, over that same time period, the year saw a drop in job openings that was the third-worst on record, behind 2008 and 2001—both years when the economy was in recession.
[Let’s take a look at this statement…]
“That churn led to historic raises for the rank-and-file (not to mention a record number of Americans starting businesses).”
“… a record number of Americans starting businesses.”
[This record was set in part due to the recent “good times”. If/when these good times morph into something else then these good times may revisit the normal times. Here is what the normal times tend to look like:]
According to data from the Bureau of Labor Statistics, as reported by Fundera, approximately 20 percent of small businesses fail within the first year. By the end of the second year, 30 percent of businesses will have failed. By the end of the fifth year, about half will have failed. And by the end of the decade, only 30 percent of businesses will remain — a 70 percent failure rate.
FWIW.
According to DICE, code monkey salaries are slightly down.
Vaughan, Richmond Hill & Markham Real Estate Update – Realtors: Stop Lying To Buyers!
Team Sessa Real Estate
10 minutes ago
In this episode we take a look at the current Vaughan Home Prices, Richmond Hill Home Prices & Markham Home Prices and market trends for week ending Jan 24, 2024. We also discuss the problems with realtors and sellers lying on their listings to try to attract people to their home. Oftentimes when homes are misrepresented, it may drive traffic but it does nothing to increase the odds of a buyer buying it because most of the traffic is misled into believing that home will suit them.
https://www.youtube.com/watch?v=6YgEaaV6dJY
13:30.
Is now a great time for dips to buy?
The Fed Dashed Hopes for March Rate Cuts. What Now?
Today’s post-Fed stock crash is little more than a buying opportunity
1d ago · By Luke Lango, InvestorPlace Senior Investment Analyst
– Today, Fed Board Chair Jerome Powell let some air out of the tires when he announced the central bank will likely not cut rates that soon. In response, stocks were crushed.
– What matters most is that multiple rate cuts do happen this year. And the central bank has confirmed that outcome.
– So long as rates go lower and earnings go higher this year – both of which seem very likely now – then stocks should rally.
…
https://investorplace.com/hypergrowthinvesting/2024/01/the-fed-dashed-hopes-for-march-rate-cuts-what-now/
The stock market has shades of the dot-com and housing bubbles as investors move into ‘junkier things,’ warns Jeffrey Gundlach
Theron Mohamed
Feb 1, 2024, 5:16 AM PST
Jeffrey Gundlach
CNBC/Getty Images
– Jeffrey Gundlach drew parallels between the stock market and the dot-com and housing bubbles.
– Investors are buying ever-riskier assets as valuations have become broadly overstretched, he said.
– The billionaire fund manager predicted a recession this summer, and recommended holding some cash.
…
https://markets.businessinsider.com/news/stocks/stock-market-outlook-dotcom-housing-bubbles-crash-gundlach-recession-cash-2024-2
Bloomberg
Evergrande Founder’s Unsold Mansion Shows Struggle to Sell Off Assets
– Liquidator may struggle to sell assets in slumping market
– Glut of distressed sales likely to weigh on Hong Kong property
The China Evergrande Centre, center, in the Wan Chai area of Hong Kong.
Photographer: Kyle Lam/bloomberg
By Shawna Kwan
January 31, 2024 at 6:46 PM PST
If the lack of buyers for a prime office tower and a mansion in Hong Kong are any guide, China Evergrande Group’s liquidators are in for a long road ahead.
Alvarez & Marsal, the company chosen this week to unwind the fallen Chinese property developer, is still trying to sell Evergrande’s $1.6 billion former Hong Kong headquarters building after it was seized in separate proceedings in 2022. That’s even after a rebranding and roadshows by agents in mainland China to attract investors.
…
https://www.bloomberg.com/news/articles/2024-01-31/nycb-plunge-flashes-a-560-billion-real-estate-warning-for-banks
Canada braces for possible wave of business bankruptcies
By Promit Mukherjee
February 1, 2024 7:03 AM PST
Updated 12 hours ago
The financial district of Toronto
A sign in the financial district in Toronto, Ontario, Canada
December 13, 2021
REUTERS/Carlos Osorio/File Photo
– A fifth to a quarter have not paid pandemic-time govt support
– Insolvencies rose 38% in first 11 months of 2023-official data
OTTAWA, Feb 1 (Reuters) – Thousands of Canadian small businesses face the risk of bankruptcy after the government ended pandemic-era support last month with the economy slowing at a time of high interest rates.
Small firms that employ fewer than 100 people are critical to the Canadian economy as they give jobs to almost two-thirds of the country’s 12 million private workers. A spike in bankruptcies, which jumped 38% in the first 11 months of 2023, would weigh on economic growth, lobby groups and economists warn.
…
https://www.reuters.com/world/americas/canada-braces-possible-wave-business-bankruptcies-2024-02-01/
Heard on the Street
The Real Evergrande Reckoning Is for China’s Foreign Creditors
Evergrande, once China’s largest developer, is finally biting the dust. Foreign creditors will be eating a handful, too.
By Jacky Wong
Jan. 30, 2024 6:10 am ET
Unfinished apartment buildings at an Evergrande site in Beijing in 2021, when it first defaulted on its bonds. Photo: Andrea Verdelli/Bloomberg News
Evergrande (-20.87% decrease; red down pointing triangle), China’s long-ailing property giant, is finally being read its last rites. It won’t be pretty—especially for the foreign creditors that helped finance its rise.
Monday’s Hong Kong court-ordered liquidation of China Evergrande, once China’s largest developer, probably won’t have much of an immediate knock-on effect on China’s struggling property market. That is because most assets are onshore in China, insulated from Hong Kong courts. But by the same token, offshore creditors are in an ugly situation—and Evergrande’s case could be a precedent for other attempted restructurings.
Evergrande, which first defaulted on its bonds in 2021, was emblematic of the property industry’s excessive leverage. As of June, the company still had the equivalent of $335 billion in liabilities, including borrowings, payables owed to suppliers and undelivered apartments to home buyers.
The liquidation itself isn’t actually that surprising. Evergrande’s dollar-denominated bonds were attracting bids of less than 2 cents on the dollar, reflecting little hope that much could be recovered. In March, an analysis by Deloitte, commissioned by Evergrande, concluded that offshore bondholders could recoup between 2.1% to 9.3% of their principal in a liquidation.
The actual rate will likely be much lower now, as shares in Evergrande’s two Hong Kong-listed subsidiaries have plummeted since then. Evergrande’s stakes in these two units are among its more valuable assets held outside of mainland China. In any case, Evergrande had negative equity of $91 billion as of June.
Most of Evergrande’s assets are directly under Hengda, its main subsidiary in China. And the different legal systems of Hong Kong and mainland China mean it may be difficult, or at least take a long time, to enforce the court order over assets held onshore. Even if mainland authorities recognize the Hong Kong liquidator’s writ, a lot of onshore assets may have already been sold or frozen by Chinese courts. Hengda has its own set of direct creditors and a lot of those borrowings are probably secured by assets such as land and buildings.
The news is bad enough for Evergrande’s lenders, but foreign creditors of other Chinese developers should also be worried about the precedent.
…
https://www.wsj.com/world/china/the-real-evergrande-reckoning-is-for-chinas-foreign-creditors-afc45bc2
“The news is bad enough for Evergrande’s lenders, but foreign creditors of other Chinese developers should also be worried about the precedent.”
Cockroach Theory suggests more gringos are going to get stiffed before this episode in financial history ends.
How To Buy China’s Dip
Carl Hazeley
over 2 years ago • 4 mins
Clocktower Group recommends buying Chinese hardware stocks and avoiding Chinese software stocks.
Quent Capital sees an opportunity in unappreciated midcap stocks – one example being used car seller Uxin.
Mirae Asset Global Investors suggests buying the dip in the Chinese tech giants.
Stewart Investors Sustainable Funds Group reckons buying companies benefiting from a global shift to sustainability, like Vitasoy, is an attractive opportunity right now.
Between energy shortages and government crackdowns, China’s economy and stock market have been battered recently. That’s sent some investors – not least the world’s richest family – hunting for deals in the region. Here’s what they’re betting on, and what you could too.
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https://finimize.com/content/how-to-buy-chinas-dip
https://m.investing.com/news/stock-market-news/stock-market-today-dow-resumes-record-run-as-dip-buyers-pile-into-tech-3289724